Capturing the Benefits of Energy Efficiency Through Target Setting

Transcription

1 Capturing the Benefits of Energy Efficiency Through Target Setting Annie Gilleo State Policy Manager American Council for an Energy-Efficient Economy Presentation at National Governors Association Workshop September 8,

2 The American Council for an Energy- Efficient Economy (ACEEE) ACEEE is a nonprofit 501(c)(3) founded in1980. We act as a catalyst to advance energy efficiency policies, programs, technologies, investments, & behaviors 50 staff; headquarters in Washington, D.C. Focus on energy efficiency in industry, buildings, & transportation sectors Research in economic analysis & financing, behavior, energy efficiency programs, national policy, utilities, state, & local policy, and some international work Diverse funding sources, including foundation grants, contracts and government grants, and conferences & publications 2

3 On the Agenda 1. Why Efficiency Matters 2. Why Target Setting Matters 3. Mechanics of Target Setting 4. Public Power and EE 3

4 CONTEXT WHY INVEST IN EFFICIENCY? 4

5 Benefits of Energy Efficiency Defer or eliminate need for new generation & transmission, keeping rates lower Lower bills for participating customers AND lowering rates for all customers Enhance system reliability by addressing grid constraints Improve health, comfort, productivity, the environment and creating jobs

6 Billion kwh Savings from Utility EE Programs Incremental annual savings Total annual savings 6

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8 Energy Saving Opportunities by Category 8

9 Cost of Energy Efficiency Compared to Other Electricity Resources 9

10 CONTEXT WHY SET AN EFFICIENCY TARGET? 10

11 Energy Efficiency Resource Standard Mandatory energy savings target Regulatory requirement to meet targets Obligated entity (utility or third-party) Adequate funding to meet targets Targets more than short-term at least 3 years 11

12 Energy Efficiency Resource Standards 12

13 Year of initial state EERS adoption. Note: *States have enacted EERS legislation but have not enacted rules for implementation or committed necessary funding to efficiency programs. 13

14 Why Targets? Establish specific goals that can be measured and used by management and regulators E.g. for performance incentives Drive more savings Of the 20 states with the most electricity savings in 2014, all have targets 14

15 Top 10 Energy Savings Targets Approx. annual electric savings target ( ) Legislative Cost State authority cap Massachusetts 2.9% Rhode Island 2.6% Arizona 2.5% Maine 2.4% Maryland 2.0% ο Vermont 2.1% Connecticut 1.5% Minnesota 1.5% Washington 1.5% Hawaii 1.4% Natural gas 15

16 CONSIDERATIONS FOR TARGET SETTING 16

17 Key Issues to Consider: Who does the target apply to? What kind of efficiency is included? What are the right target levels? When are the targets applied? How are savings measured and evaluated? How often are targets revisited? 17

18 Types of Energy Efficiency Programs Prescriptive Programs Provide set incentive for EE product purchases or measures (e.g., lights, appliances, insulation) Direct install programs Implementation contractor installs measures directly (e.g., lighting, thermostats, low-flow shower heads) Custom programs Incentivizes complex measures that offer large savings (e.g., whole building upgrades, industrial processes)

19 OUTSIDE OF THE IOU BOX WHY MUNICIPAL UTILITIES INVEST IN EE 19

20 Municipal Utility Efficiency Investments

21 Motivating Factors: Survey Factor Average Rating Range Efficiency is a resource customers like Value of efficiency as a supply side resource Economic benefits in service territory Municipal government requirement Greenhouse gas reduction (as part of plan) State policy or regulatory requirement Reduces supply costs Other environmental benefits

22 Motivating Factor: State Policy - Michigan - PA295 (2008) EERS for all utilities of 1% savings per year - Washington - I-937 (2006) utilities serving over 25k customers must pursue cost effective programs

23 Motivating Factor: Energy Efficiency as a Resource - Survey 7.8 average rating from respondents - Reduced future customer demand, rates and energy supply costs

24 Challenges: Revenue Adequacy - Loss of sales = loss of revenues - This can be avoided! - Proper forecasting - Rate adjustments - Decoupling

25 Resources EERS Policy Brief EERS Toolkit and Sample Language State Policy Database Municipal Utility Energy Efficiency Examples ACEEE Technical Assistance 25

26 Thank you! Annie Gilleo

27 Target Setting - Examples Arkansas Target Timeframe: Multi-year cycles Baseline: 2010 consumption

28 Target Setting - Examples Arizona Target Timeframe: Baseline: Prior year s consumption Cooperatives must achieve 75% of targets

29 Target Setting - Examples Pennsylvania Specific targets vary by utility Target Timeframe: 3-5 year phases Baseline: 2010 sales forecast

30 Target Setting Options for Getting Started Consider historical performance Look to other states as indicators of reasonable ramp-up rates over time Conduct a potential study Engage stakeholders Solicit public input

31 Target Setting Baseline Considerations Fixed Baseline Based on consumption in a given year (i.e. 2016) Gives certainty in the amount of required savings Not affected by market conditions Examples: PA, AR Rolling Baseline Based on prior retail sales (i.e. previous year or average of previous three years) May create uncertainty unless targets are converted to MWh during planning process Responsive to market conditions Examples: AZ, IA

32 Target Setting Accounting for Savings What Did Utilities Do This Year? Savings in a given year resulting from EE measures installed in that year. (Incremental savings) Compliance assessment focuses on first year savings May incentivize lower cost measures with shorter measures lives

33 Target Setting Accounting for Savings What s The Big Picture? Savings in a given year resulting from EE measures installed in that year and also those installed in prior years that continue to provide savings (Cumulative or total annual savings) Compliance assessment focuses on lifetime savings Incentivizes measures that provide savings both in the nearterm and long-term Less prescriptive about actions taken in a single year Cumulative And Incremental Targets Can Be Combined Utilities can have a long-term goal (over a 3-year phase or for lengthier period of time) with interim targets to hit each year.

34 Target Setting Model The commissioner shall establish energy-saving goals for energy conservation improvement expenditures and shall evaluate an energy conservation improvement program on how well it meets the goals set Each individual utility and association shall have an annual energy-savings goal equivalent to 1.5 percent of gross annual retail energy sales The commissioner must adopt a filing schedule that is designed to have all utilities and associations operating under an energy-savings plan by calendar year Minn. Stat. 216B

35 Commission Directive Model The commission shall adopt an energy efficiency and conservation program to require electric distribution companies to adopt and implement cost-effective energy efficiency and conservation plans By May 31, 2011, total annual weathernormalized consumption of the retail customers of each electric distribution company shall be reduced by a minimum of 1%... By May 31, 2013, the total annual weather-normalized consumption of the retail customers of each electric distribution company shall be reduced by a minimum of 3%... By November 30, 2013, and every five years thereafter, the commission shall evaluate the costs and benefits of the program If the commission determines that the benefits of the program exceed the costs, the commission shall adopt additional required incremental reductions in consumption Pa C.S

36 All Cost Effective Model The commission shall issue an order approving all energy efficiency measures that are cost-effective and lower-cost than acquisition of additional supply. - Rhode Island Code

37 Target Setting Timeframe Considerations Allow time within a cycle for utilities to ramp up programs and refine program delivery Create market certainty for customers (no switching on/off of programs) Encourage deep savings and long-lived measures, not just cream skimming Consider potential for adjustments based on changing market conditions Persistence and market awareness are important

38 Motivating Factor: State Policy - California - AB 1890 (1996) - Public benefits charge to fund program - SB 1037 (2005) - Annual reporting requirements to CEC and customers on energy efficiency and demand response - AB 2021 (2006) - Directs utilities to identify all cost effective savings to establish 10 year targets

39 Motivating Factor: Energy Efficiency as a Resource Seattle City Light 2012 IRP

40 Motivating Factor: Economic Development - Survey 7.7 average rating from respondents - Interviews strong economic development benefit of efficiency - Bottom line - Electricity prices - Customer discretionary income - Local jobs

41 Motivating Factor: Customer Engagement and Satisfaction - Survey 8.5 average rating from respondents - Participation in utility programs increases customer satisfaction

42 Motivating Factor: Savings Targets - Fort Collins Utilities : 1.5% to 2020: 2.5% - CPS Energy (San Antonio, TX) - Save Energy for Tomorrow - Save 771 MW between 2009 and 2020